Correlation Between NYSE Composite and El Paso
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and El Paso at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NYSE Composite and El Paso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and El Paso Energy, you can compare the effects of market volatilities on NYSE Composite and El Paso and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NYSE Composite with a short position of El Paso. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and El Paso.
Diversification Opportunities for NYSE Composite and El Paso
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and EP-PC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and El Paso Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Paso Energy and NYSE Composite is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NYSE Composite are associated (or correlated) with El Paso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Paso Energy has no effect on the direction of NYSE Composite i.e., NYSE Composite and El Paso go up and down completely randomly.
Pair Corralation between NYSE Composite and El Paso
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.39 times more return on investment than El Paso. However, NYSE Composite is 1.39 times more volatile than El Paso Energy. It trades about 0.08 of its potential returns per unit of risk. El Paso Energy is currently generating about 0.07 per unit of risk. If you would invest 1,553,974 in NYSE Composite on August 28, 2024 and sell it today you would earn a total of 468,062 from holding NYSE Composite or generate 30.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. El Paso Energy
Performance |
| Timeline |
NYSE Composite and El Paso Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
El Paso Energy
Pair trading matchups for El Paso
Pair Trading with NYSE Composite and El Paso
The main advantage of trading using opposite NYSE Composite and El Paso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, El Paso can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in El Paso will offset losses from the drop in El Paso's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| El Paso vs. Dynagas LNG Partners | El Paso vs. GasLog Partners LP | El Paso vs. Aquagold International | El Paso vs. Morningstar Unconstrained Allocation |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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